CBSE Class 12 Business Studies Financial Management MCQs Set E

Question. Under financial management a forecast of receipts and payments is made and the shortage or sufficiency of ________ is ensured.
(a) Capital
(b) Human resource
(c) Material
(d) All the above

Answer : A

Question. ________ is not included in owner’s capital?
(a) Equity share capital
(b) Long-term debt
(c) Preference share capital
(d) Retained profit

Answer : B

Question. Capital Structure is called ________ .
(a) Quantitative aspect
(b) Qualitative aspect
(c) Both (a) and (b)
(d) None of these

Answer : B

Question. Which investment decisions are difficult to be changed?
(a) Fixed capital decision
(b) Working capital decision
(c) Both (a) & (b)
(d) None of these

Answer : A

Question. ________ is the example of a financial decision.
(a) Investment decision
(b) Financing decision
(c) Dividend decision
(d) All of these

Answer : D

Question. The difference between current assets and current liabilities is called ________.
(a) Net working capital
(b) Gross working capital
(c) Fixed capital
(d) Working capital

Answer : A

Question. In case of price-rise ________ working capital is required in order to maintain the previous level of production.
(a) Less
(b) More
(c) Nil
(d) Very little

Answer : B

Question. A company is attracted to what capital out of the following with reference to floatation costs?
(a) Equity Share Capital
(b) Preference Share Capital
(c) Debt Capital
(d) None of these

Answer : C

Question. ________ will be the amount of net working capital if the value of current assets is ™ 50,000 and the current liabilities is ™35,000?
(a) ™ 50,000
(b) ™ 35,000
(c) ™15,000
(d) ™ 85,000

Answer : C

Question. What is the chief financial question before an organisation?
(a) How much finance will be required for various business activities.
(b) How much amount can be acquired from various resources.
(c) How the profit of the business will be divided.
(d) All of these

Answer : D

Question. Enough working capital is an index of the ________ of business.
(a) Strength
(b) Weakness
(c) Liquidity
(d) Loss

Answer : C

Question. What capital out of the following should be used in case of low rate of interest on debt?
(a) Equity Share Capital
(b) Preference Share Capital
(c) Debt Capital
(d) None of these

Answer : C

Question. Financial planning means ________ of financial activities.
(a) Determining
(b) Pre-determining
(c) Later -determining
(d) Not determining

Answer : B

Question. What does affect the value of company?
(a) Capital cost
(b) Market price of shares
(c) Both (a) and (b)
(d) None of these

Answer : C

Question. What is influenced by the financing decision?
(a) Market price of shares
(b) Cost of capital
(c) Both (a) and (b)
(d) None of these

Answer : C

Question. What is the meaning of the management of working capital?
(a) To maintain the continuity of sufficient amount of working capital.
(b) To make cash available in large amount.
(c) To keep the working capital at the minimum level.
(d) To keep the working capital at the maximum level.

Answer : A

Question. Without ________ no business planning can be successfully implemented.
(a) Dividend decision
(b) Investment decision
(c) Both of above
(d) Financial planning

Answer : D

Question. Which branch of management does take care of the efficient planning and controlling of the financial activities of an organisation?
(a) Production management
(b) Financial management
(c) Marketing management
(d) Personnel management

Answer : B

Question. Fixed capital means that capital which is used in purchasing ________ assets.
(a) Current assets
(b) Fixed assets
(c) Material
(d) All the above

Answer : B

Question. What out of the following happens because of the optimum amount of working capital?
(a) Profitability increases
(b) No decrease in liquidity
(c) Both (a) & (b)
(d) Decrease in liquidity

Answer : C

Question. The meaning of capital structure relates to the percentage of ________ sources.
(a) Long-term
(b) Medium term
(c) Short-term
(d) Current

Answer : A

Question. Shareholder’s current wealth in a company = ________ × ________ .
(a) Face value of shares × Market price per share
(b) Number of shares × Face value of shares
(c) Number of shares × Market price per share
(d) Number of shares × Profit per share

Answer : C

Question. The importance of ‘Trading on Equity’ lies in the fact that if the company is earning more profit, it can make use of borrowed capital and preference share capital and by doing so it can increase the income of ________
(a) Preference Shareholders
(b) Lenders
(c) Equity Shareholders
(d) Government

Answer : C

Fill In The Blanks :

Question. The decision involved in expenditures on advertising campaign or research and development programme is called _____.
Answer : Investment or Capital budgeting decision

Question. The decision in financial management which affects the growth, profitability and risk of the business is called _____.
Answer : Capital budgeting decision (long-term investment decision)

Question. Koby Ltd. is an 87-year-old reputed consumer goods company. It is known for offering good quality electronic products at reasonable prices. It has branches all over India. It has a large shareholder base. The shareholders desired that some dividend is paid every year on their investments. Company’s management understands that it is important to keep the shareholders happy and satisfied. As a matter of policy, they declare a certain amount of dividend every year out of profits rather than reinvesting the whole as retained earnings. The factor affecting dividend decision being highlighted in the above situation is ________ .
Answer : Shareholders preference

Question. ___________ is concerned with optimum procurement as well as the usage of finance.
Answer : Financial management.

Question. The decision in financial management which influences the overall business risk complexion of the firm is called ______.
Answer : Capital budgeting decision (long-term investment decision)

Question. _____________ aims at mobilisation of financial resources at a lower cost and deployment of these in most lucrative activities.
Answer : Financial management

Question. The primary aim of financial management is _______________. (Complete the sentence)
Answer : To maximise shareholders wealth.

True / False :

Question. The extent of retained earnings also influences the financing decision of the firm. True/False? Give reason.
Answer : True

Question. Dividend division should be taken keeping in view the overall objective of maximising shareholders wealth. True/False?

Answer : True

Question. Higher dividends may be declared if tax rates are relatively higher. True/False? Give reason.
Answer : False

Question. 'Other things remaining the same, a company having stable earnings is in a better position to declare higher dividends.' (True/False)
Answer : True

Question. The dividend in growth companies is smaller than that in the non-growth companies. True/False? Give reason.
Answer : True

Question. What is the effect of increased use of debt on the overall cost of capital?
Answer : Increased use of debt is likely to lower the overall cost of capital/funds of the firm.